El Pollo Loco 2015 Annual Report Download - page 34

Table of Contents
and costly for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to
incur substantial costs to maintain the same or similar coverage. These statutes and regulations could also make it more difficult for us to attract
and retain qualified individuals to serve on our board of directors, on board committees, or as executive officers. Our management and other
personnel devote a substantial amount of time to compliance initiatives. As a result, management’
s attention may be diverted from other business
concerns, which could harm our business and operating results. Although we have hired additional employees to comply with these
requirements, we may need to hire more employees in the future, which will increase our costs and expenses.
Our management team and other personnel devote a substantial amount of time to new compliance initiatives, and we may not successfully or
efficiently manage our transition to being a public company. To comply with the requirements of being a public company, including the
Sarbanes–Oxley Act, we may need to undertake various actions, such as implementing new internal controls and procedures, and hiring
accounting or internal audit staff, which would require us to incur additional expenses, and could harm our results of operations.
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those
relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible
to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “
emerging
growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the
Sarbanes–Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and
exemptions from the requirements of holding a non-
binding advisory vote on executive compensation and of stockholder approval of any golden
parachute payments not previously approved. We may take advantage of some of these exemptions. If we do, we do not know if some investors
will find our common stock less attractive as a result. The result may be a less-active trading market for our common stock and increased stock
price volatility.
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging
growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We
have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting
standards as other public companies that are not emerging growth companies.
We can remain an “emerging growth company” for up to five years from our IPO, or until the earliest of (a) the last day of the first fiscal year in
which our annual gross revenues exceed $1 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the
Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last
business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1 billion in non-
convertible debt securities in the preceding three-year period.
We have not previously been required to assess the effectiveness of our internal control over financial reporting, and we may identify
deficiencies when we are required to do so.
Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of internal control over financial
reporting, starting with our second annual report. We have not previously been subject to this requirement, and, in connection with the
implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies. We
may not be able to remediate any future deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with
Section 404(a).
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